Recent Developments in 340B Drug
Discount Program
Michael Earls
Manager
BKD East Region 340B Drug Program Leader
mearls@bkd.com Brad Brotherton
Partner
BKD 340B Drug Program Leader
bbrotherton@bkd.com
August 29, 2013
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Materials Covered in Today’s Webcast
• 340B Program Refresher
• Hospital-Covered Entities
• Changes to Orphan Drug Rule
• Recertification Process
• Compliance Trends
• Preparation for Audits
• 340B Hot Topics
• 340B Compliance Summary
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340B Program Refresher – History
• Established by section 602 of Veterans Health Care
Act of 1992
• Codified as section 340B of Public Health Service Act
(PHSA)
• Section 340B instructs Department of Health and
Human Services (HHS) to enter into agreements with
drug manufacturers of covered outpatient drugs
340B Program Refresher – History
• Provides discounts on outpatient drugs purchased
by “safety net” providers for eligible patients
• Average savings of 25 - 50% for eligible covered
entities on outpatient drugs
• Savings can be used to
o Provide discounts on drugs to patients o Expand services by provider to patients o Provide services to more patients
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340B Program Refresher –
Hospital-Covered Entities
• Traditional method
o Hospital DSH percent exceeding 11.75% payment add-on
Updated SSI percentages may affect DSH qualifying percent Annual recertification of DSH percent now required – mid-August
o Not-for-profit (NFP) entity with contract with local
government to care for indigent
340B Program Refresher – Contract
Pharmacy Arrangements
• Retail pharmacies contracted for “Bill To - Ship To”
arrangement
• Multiple contract pharmacy guidelines went into effect
on April 5, 2010
• Significant opportunity to expand Rx access
• New compliance challenges, including “expectation of”
annual independent audits
• Covered entities remain responsible for 340B
compliance for contract pharmacy transactions
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340B Program Refresher – Hospital
Covered Entities
• PPACA revisions
o All NFP/governmental critical access hospitals (CAH) are eligible
o Sole community hospitals (SCH) & rural referral centers
Recent Changes to Orphan Drug Rules
• Orphan drug rule is applicable to covered entities
participating as SCH, RRC, CAH & free-standing
cancer hospitals
• Since 2010, these types of covered entities have
been unable to purchase orphan drugs at 340B price,
regardless of illness the drug was prescribed to treat
• Orphan drugs are defined by section 526 of Federal
Food, Drug, and Cosmetic Act for rare disease or
condition
9
Recent Changes to Orphan Drug Rules
• July 23, 2013, Health Resources Services
Administration (HRSA) published long-awaited final
regulations on orphan drugs
• Based upon issuance of final regulations, the
following changes occur October 1, 2013
o Covered entities registered as SCH, RRC, CAH &
free-standing cancer hospitals will be eligible to receive 340B pricing on orphan drugs where the orphan drugs are not used to treat a rare disease referred to as an orphan illness
Recent Changes to Orphan Drug Rules
• Based upon issuance of final regulations, the
following changes occur October 1, 2013:
o Anticipated this will result in additional savings for some
covered entities
o HRSA makes it clear covered entity has responsibility to
maintain auditable records that demonstrate compliance with terms of orphan drug exclusion requirements
o This rule is expected to continue to protect financial
incentives for manufacturing drugs designated as orphan drugs
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Recent Changes to Orphan Drug Rules
• Potential concerns or issues if 340B-covered entity
uses orphan drugs within 340B-eligible patients
o Development of auditable tracking system
o How to ensure prescriptions filled at covered entity’s retail
pharmacy or through contract pharmacy were not related to treatment of the rare disease (is an eligible
2013 Recertification Process
• Recertification process is currently under way!!
• Emails were sent to authorizing officials & primary
contacts in early August
• Recertification process for all hospital types started
August 19, 2013, & is required to be completed by
September 13, 2013, or covered entities will be
removed from the program
• There have been some changes to recertification
process authorizing officials should be aware of
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2013 Recertification Process
• Authorizing official must attest to the following eight
statements
• “As an Authorized Official, I acknowledge the 340B
covered entity’s responsibility to abide by & further
certify on behalf of the covered entity that:
1. all information listed on the 340B Program database for the covered entity is complete, accurate, and correct;
2013 Recertification Process
2. the covered entity meets all 340B Program eligibility
requirements, including section 340B(a)(4)(L)(iii) if applicable – the Group Purchasing Organization prohibition – which ensures that the covered entity does not obtain covered outpatient drugs through a group purchasing organization or other group purchasing arrangement;
3. the covered entity is complying with all requirements and restrictions of Section 340B of the Public Health Service Act and any accompanying regulations or guidelines, including, but not limited to, the prohibition against duplicate discounts/rebates under Medicaid and the prohibition against transferring drugs purchased under 340B to anyone other than a patient of the entity;
continued on next slide
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2013 Recertification Process
4. the covered entity maintains auditable records demonstrating compliance with the requirements described in paragraph (3) above;
5. the covered entity has systems/mechanisms in place to ensure ongoing compliance with the requirements described in (3) above;
6. if the covered entity uses contract pharmacy services, that the contract pharmacy arrangement is being performed in accordance with OPA requirements and guidelines, including, but not limited to, that the covered entity obtains sufficient information from the
2013 Recertification Process
7. the covered entity acknowledges its responsibility to contact OPA as soon as reasonably possible if there is any material change in 340B eligibility and/or material breach by the covered entity of any of the foregoing; and
8. the covered entity acknowledges that if there is a breach of the requirements described in paragraph (3) that the covered entity may be liable to the manufacturer of the covered outpatient drug that is the subject of the violation, and depending upon the circumstances, may be subject to the payment of interest and/or removal from the list of eligible 340B entities.”
• This is a new requirement Authorizing Officials must
attest to! Are you ready?
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Compliance Trends
• Brief history
o March 2010 – PPACA requires GAO study on use &
oversight of 340B program
o September 2011 – GAO issues report
Covered entities are effectively using the program Oversight is lacking
Need for clearer guidance evident (specifically regarding definition of patient)
Still pending – HRSA is currently drafting omnibus 340B rule – June 2014?
Compliance Trends
• Brief history (continued)
o October 2011 – HRSA OPA issues response to Senator
Grassley’s concerns, which are similar to GAO report
o Indicates selected audits will begin in 2012 o March 2012 – Policy release describing audits o Expansion of covered entities & appeal of contract
pharmacy option have created additional attention to this program
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Compliance Trends
• 51 audits completed in 2012 by HRSA
o 34 now publicly available & final
o 150 audits planned for 2013 (budget cuts could have an
impact)
• To date, minimal drug manufacturer audits have
occurred, but more are expected
Compliance Trends
• Common findings from HRSA reviews include
o Incorrect database information o Diversion*
o Duplicate discounts*
*Compliance with these requirements remains hospital’s obligation even in contract pharmacy arrangement
• Expectation of Corrective Action Plan for Findings
o When diversion & duplicate discount findings occur,
timelines & resolution processes are required
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Compliance Trends – Diversion
• Diversion
o 340B drugs given to individuals not meeting specific outpatient
criteria
o Drugs relate to services for inpatients or in NRCC areas of
hospital
o Prohibits resale or transfer of drugs purchased at 340B to person
who is not a patient of covered entity
o Focus on defining “patient” & “covered entity” o Most recent defini on of “pa ent”―1996 o Who is “covered entity”?
Medicare cost report test & where services are provided
Compliance Trends – Duplicate
Discounts
• Duplicate discounts – recent program notice
o 340B laws prohibit application of both 340B price discount
(front end) & payment of pharmacy rebate to state Medicaid (back end) on same drug claim
o General options for covered entities
Carve-out Medicaid from 340B drug purchases (GPO exclusion needs considered)
Carve-in Medicaid – Requires verifying Medicaid exclusion file is accurate
What about Medicaid managed care or other state programs with Title XIX funding?
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Compliance Trends – Duplicate
Discounts
• Medicaid duplicate discount
o Some states have been slow to establish & communicate
Medicaid billing requirements & potential modifiers
o Transition to Medicaid managed care has created confusion o Contract pharmacies should not “Carve-in” unless
arrangement with state Medicaid exists
Compliance Trends
• Consequences of noncompliance
o Repayment of discount
o Suspension from 340B program
o Possible CMPs for knowing & intentional violations o Potentially false claim liability (ripe for qui tam actions?) o Changing landscape of enforcement & audit
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Preparation for Audits
• Based on common findings from HRSA audits, being prepared is critical
• Performance of internal review procedures throughout the year is critical (there are sample audit guides available, including from APEXUS)
• Is an internal review enough? Covered entities should consider independent mock reviews performed by independent third party
• New compliance challenges, including “expectation of” annual independent audits, especially surrounding contract pharmacy relationships
Preparation for Audits
• Example procedures to perform internally
o Gather all policies & procedures related to 340B o Obtain data policies for any vendor softwareo Obtain copies of all 340B contracts with pharmacies
and/or other 340B service providers
o Obtain all Medicaid ID numbers, provider numbers & NPIs
for all entity sites billing Medicaid (including Medicaid managed care) for 340B drugs & point of contact with State Medicaid agency (could represent multiple states & MD contracts)
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Preparation for Audits
• Example procedures to perform internally
o Obtain population of all 340B dispensations for a specified
period of time (typically six months) & select samples based on high-cost drugs & Medicaid transactions
o Additional procedures should be developed around
contract pharmacy relationships
Preparation for Audits
• Other compliance considerations
o GPO exclusion – Important recent program notice
Covered entities are prohibited from using GPO for OP-covered drugs (are there exceptions?)
Noncompliance means you cannot be in 340B program
o Cherry picking
340B price is not always best, but OPA expects that you use 340B price for all OP drugs
o Capture correct NDC for OP drug used 29
340B Hot Topics
• GPO Exclusion – (if applicable)
o Required compliance on August 7 (no extensions) o How do some multiuse items fit into this program?
Contrast media Anesthesia gases Other
340B Hot Topics
• Manufacturer audits & communication increasing
o Respond timely to manufacturer requests to resolve
questions without their need to request OPA for approval for full audit
o Manufacturers are performing increasing analytics on data
to identify outliers in drug purchasing
o Some initial focus has been seen on duplicate discount
issues
Manufacturers have access to some Medicaid claims level data
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340B Hot Topics
• Health care reform & ACA impact?
o Changes to Medicare DSH formula have been proposed―
how will this impact 340B?
o What will congressional appetite be for 340B if insurance
expansion is realized as intended?
o Caution regarding projections for this program into the
340B Hot Topics
• Congressional intent of the program
o Debated by some members of Congress
o Several hospitals have been challenged to respond on use
of funds generated from program savings
o Monitoring this issue in Congress is important o Developing method of tracking 340B savings &
documenting how those funds are used for indigent & underserved patients is current best practice
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340B Hot Topics
• 340B Compliance Plan for Outpatient, Mixed-Use &
Contract Pharmacy programs
o Demonstrates good-faith commitment to compliance o Increases likelihood of identifying & correcting mistakes o Includes multiple aspects of the program & process for
responding to concerns identified
• Reconsideration of provider-based physicians
o Eligible to extend 340B savings to provider-based
340B Compliance Summary
• 340B program & related multiple contract pharmacy
relationships can be very beneficial but complicated
to ensure compliance
• Compliance risks are a reality to be monitored
closely
• Regardless of 340B program administrator selected,
make sure hospital is comfortable with definitions &
policies applied to program
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